Calif. Gov. Races Against Clock to Fix Power Crisis

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Fair use for educational/research purposes only

Calif. Gov. Races Against Clock to Fix Power Crisis January 15, 2001 3:53 pm EST

By Dan Whitcomb LOS ANGELES (Reuters) - California Gov. Gray Davis worked furiously on Monday to solve the state's power crisis, fighting an uphill battle to sell his new plan to skeptical power producers and consumers as utilities teetered on the brink of bankruptcy.

Davis -- racing against the clock as Southern California Edison and Pacific Gas and Electric fast ran out of money -- pushed a plan under which the state would buy power cheaply using its good credit, then sell it to the utilities at cost.

But power producers appeared hesitant to sell at Davis' proposed price -- 5.5 cents per kilowatt-hour -- saying that their costs dictate a price of 8.5 cents per kilowatt-hour, even under the governor's planned three-year contract.

"I don't think suppliers, given all the money on the table, are going to bend very much on the contract terms and price," Gary Ackerman of the Western Power Trading Forum told the Los Angeles Times.

Meanwhile, industry sources said Southern California Edison, one of the state's two largest utilities, was unable to pay a December bill from power producers due Tuesday. Edison declined comment and it was not immediately clear what that might mean for the troubled utility.

California is in the midst of a power crisis with a chronic shortage of supply threatening to plunge the country's most populous state into darkness. The supply crunch has helped to send wholesale prices to record levels.

UTILITIES DEEP IN DEBT

San Francisco-based Pacific Gas and Electric and Southern California Edison, which is based in the Los Angeles' suburb of Rosemead, have run up billions of dollars of debt this year because they have not been allowed to pass on skyrocketing wholesale power costs due to a rate freeze imposed under the state's much-criticized power deregulation program.

The burden has driven them to the brink of bankruptcy.

A spokesman for Pacific Gas and Electric could not be reached for comment Monday on the governor's proposal or on its financial prospects. An Edison spokesman declined comment.

Davis, whose political future could depend on successfully navigating the power crisis, believes he can convince suppliers to sell at his price because he is offering long-term contracts and because the state is a better credit risk than the troubled utilities.

But the governor must first lawmakers to sign on to his plan, because currently California has no mechanism to buy and sell power itself. And he needs to do that in a hurry -- possibly by Tuesday -- before the utilities go bankrupt.

Last week the lights nearly went out in 2 million homes with the two utilities credit problems contributing to a desperate shortage of electricity. Blackout were averted only when a solvent agency -- the California Department of Water Resources -- stepped in to buy power for the utilities.

Consumer groups, who fear that taxpayers will be asked to bail out the utilities, say they too are skeptical of Davis' plan, saying that any deal should include provisions preventing the utilities from collecting previously incurred costs.

http://www.iwon.com/home/news/news_article/0,11746,79847|top|01-15-2001::16:05|reuters,00.html

-- Martin Thompson (mthom1927@aol.com), January 16, 2001


Moderation questions? read the FAQ